If all this works out, then IBM will be one of the luckiest companies in the world. eWeek has learned a lot of details regarding the IBM-sun acquisition talks, as well as that today, the Sun board is holding another meeting to discuss the talks. The outcome could be that IBM would buy Sun after all – but at a much lower price since Sun’s shares fell 25% after it had broken off the negotiations with IBM.
eWeek has a lot more details on why Sun turned down IBM’s offer. Apparently, Sun’s board , lawyers, and CEO were divided into two groups when it comes to whether or not IBM’s offer should be accepted. A majority group led by CEO Jonathan Schwartz were in favour of the acquisition, but another group, led by co-founder and chairman Scott McNealy were against it. It seems as if the disagreements were quite sharp, and because of the stalemate, they decided to blow off IBM’s offer.
It all broke because they thought the price offered by IBM was too low, but also because of a lack of assurances on IBM’s end of providing full legal support for Sun in current and possible future anti-trust cases. For instance, Sun is currently in a court case with NetApp over the ZFS file system, and the US Securities & Exchange Commission will most likely investigate the possible IBM-Sun deal; the two companies would comprise two-thirds of all high-end data server sales.
Our favourite cuddly “people familiar with the case” have whispered to eWeek that the talks within Sun are set to continue to today, after being shelved for the weekend. There is a possibility that the IBM-Sun deal will still continue, because if it doesn’t, a shareholder revolt could lead to lawsuits. Sadly for Sun, shares of the company have dropped 25% since they blew off IBM’s previous offer, meaning IBM can certainly lower its price.
A triple take-out hit-and-roll with which IBM would steal the end.
It is highly unlikely that IBM can offer a price (much) below their previous offer. In fact, Sun was trading below $5 before the offer was ever heard of, the price was only driven up to the $8-9 region because of the IBM deal which would value Sun at that level. As such, the current drop to $6-7 is not that relevant, Sun is still trading much higher than it was when the talk about the original offer was first making the rounds.
Significant premiums are really par for the course in this type of deal.
Edited 2009-04-08 12:55 UTC
scott is resisting the deal like yang resisted the microsoft-yahoo deal. he wants the best for his baby.
unfortunately his baby is grown up into a monster, like companies do, and its not his baby anymore.
the best thing to do is let the big monster be acquired and destroyed, and start a new baby. that is the way of these things. all good things must come to an end.
More like he has been holding his baby so tightly, it has been slowly asphyxiating for the past 8 years.
I can understand him wanting to protect “his baby”, but his stonewalling the deal is only guaranteeing a lower price, or total collapse of Sun, and shareholder revolt and lawsuits.
That is stupidity beyond description, and isn’t protecting anything, other than McNealy’s own reputation as an idiot.
The guy seems to lack common sense. He didn’t see the Linux on cheap x86 boxes revolution coming, and had his @ss handed to him on a silver platter. Then he steadfastly held on to the belief that the market for premium high end, expensive, servers would make a comeback – c’mon, Scott, why would customers want to pay 10 times more on something when the cheaper option does the job quite nicely? – knock,knock hello McFly!.
Those two things sealed Sun’s fate. It was only a matter of time.
Schwartz had some pretty good ideas, and he overall did a more solid, pragmatic job than McNealy (the numbers were better). But his open source strategy was too little, too late, and also went to far (don’t give away everything – even Red Hat doesn’t do that – you have to pay for RHEL, else use a clone like CentOS).
Anyway, McNealy has an ego the size of Alaska, and it’s blocking what really needs to be done.
What a fool.
Edited 2009-04-08 14:25 UTC
The sale of Sun has to happen. No company can sustain billion dollar losses year after year, not in the current climate, and I’m rather bemused as to the alleged reasons why talks were broken off. It makes you wonder what planet Scott McNealy is on.
It’s well ahead of the actual share price, and if you keep posting losses like you’re doing and breaking off takeover talks then it will only get lower. Beggers cannot be choosers. The company is in trouble with no end in sight, shareholders and employees who have shares will end up revolting and IBM would obviously like to buy.
What? Seriously. What? Obviously if IBM buys Sun then yes, it will have certain responsibilities it will have inherited, legal issues being one of them. However, one of the perks of stumping up cash to takeover a company is that you deal with those in your own way.
Takeovers and Mergers 101: It seems as though some of the Sun execs are not clued up on this and believe that Sun can be kept going as a separate entity even after IBM’s takeover. Hint: They are not your decisions to make.
From what this article (and others) said, is that the main point of contention from “nay” camp is executive bonuses and/or their goldne parachutes.
What??? I mean …. WTF??????
You dimwits drove the company into the ground, and caused it to lose billions, and you want a freaking bonus, or golden parachute???
For the sake of Sun shareholders, employees, and customers, I hope McNealy gets seriously reamed – as in no bonus, no goldnen parachute, and gets sued into poverty.
It’s so sad, because Sun has produced a lot of great tech over the years, and has world class engineers. But they had McDufus mas CEO, now Chairman (and apparently sill holding a lot of power), totally screwing things up for this formely great company.
Let McNealy’s ego, greed, and stupidity cause him to reap what he sows.
++
It strikes me as an example of a common trend I’ve noticed in the past few months. While most people seem to be reacting to economy’s problems by trying to cut costs and adapt, some (like McNealy) seem to be taking the attitude of:
“Well, we’re on the Titanic and it’s going down anyway – so let’s indulge ourselves as much as possible before we sink beneath the waves. Waiter – more champagne and caviar!”
Is that Sun could go private, led by McNealy and some of Sun’s other original founders (Bill Joy included), and, with their contacts and clout, regroup and re-invent itself has something leaner and meaner.
Under such a scenario, there would be massive layoffs (which is going to happen no matter what), and off-loading of areas that are under-performing (Solaris, sparc), and re-focussing on areas with big potential (storage, cloud, blades, green-tech, Glassfish).
Then perhaps Java can be offloaded as a non-profit foundation, a la Eclipse or Mozilla or the Linux foundation.
I fail to see what this would solve. Sun has had a business model and a market that worked for about nineteen years (with warning signs several years earlier) until the wheels started to fall off when cheaper alternatives started to become available. Under McNealy’s tutelage they utterly failed to accept it or even to come up with an adequate response, and to be fair, Schwartz has inherited that political baggage.
Yes, but they’ve been doing that for years with no success. If they lay off more people then they won’t be able to maintain what they want to keep. That’s why they have such high costs.
It was always going to be inevitable that unless they could make SPARC work (push it into a higher end niche like IBM’s Power or give it the performance of x86 platforms) and free Solaris completely, get more external people involved in development and cost share in the face of what Linux has done to them, then they would have to drop all further development.
However, no one has been able to do that yet, no one has been strong enough and McNealy is certainly not the man to do it.
They should make Java into the universal cross-platform development platform for desktops that Microsoft was so afraid it would become. That’s why Java stagnated. You aren’t goign to get that with the usual suspects though.
I dont see SPARC underperforming. It is one of the fastest growing markets for SUN. Billion USD business.
Also, SPARC has several performance world records, way faster than IBM Power servers.
In fact, IBM power CPUs suck badly. IBM needs 3 Power servers with 14 Power5 4.7GHz CPUs to achieve half of the performance of ONE Sun T5440 with 4 Niagara 1.4GHz. Now THAT is really bad performance. Dont you think?
http://blogs.sun.com/mandalika/entry/siebel_8_0_on_sun
IBM Power servers are way overpriced. One of them cost 400k USD, and a SPARC server costs 70k USD, and Power server gives much less performance than a SPARC also:
http://blogs.zdnet.com/Murphy/?p=1537
SEGEDUNUM
Why do you state that “SPARC should be given the performance of a x86 CPU”? One company migrated 251 Dell Linux dual CPUs to 24 Sun T5440 machines with 1.4GHz SPARC CPUs.
Ive asked you over and over again, if you are statings things as “facts”, please back the “facts” up. Is that so hard to do? Otherwise it seems that you have no clue what you are talking about.
It’s declining at a rate of knots, which is why Sun is in the position that it’s in. It’s not rocket science and if you think it’s a growing market then you’re so stupid it isn’t even funny. Seriously.
SPARC does not compete enough with Power. It’s main competition is in areas where x86 has long since moved in and displaced it.
Sigh…….. Because that’s what has eaten SPARC’s lunch for over ten years and why the company is in the state that it’s in.
Bully for them but I’m afraid that they’re very much in a minority and the performance of SPARC is why Sun’s workstation business has completely disappeared. The majority just want to complete their existing tasks at a faster rate.
Probably because you don’t want to see the facts. Sun is trying to sell itself. You might ask yourself why and start there. Facts? Why do you think Sun is trying to sell itself if its product line is so compelling to people and as brilliant as you make out? Those are the only facts you need I’m afraid.
All this coming from someone who is so deluded he thinks that SPARC is a growing market. Deluded. Simply deluded. I’ve seen it in every Sun person I have seen for the past ten years.
And here’s another rumor still, hot off the press. How true it is, I don’t know. This is the only source I’ve seen for it. Take it for what it’s worth…
http://scotlandonsunday.scotsman.com/business/Rebel-Sun-directors-f…
>>I dont see SPARC underperforming. It is one of the >>fastest growing markets for SUN. Billion USD >>business.
>It’s declining at a rate of knots, which is why Sun >is in the position that it’s in. It’s not rocket >science and if you think it’s a growing market then >you’re so stupid it isn’t even funny. Seriously.
Ok, maybe I was a bit unclear. The SPARC business may be declining, but I am talking about the Niagara SPARC business which is growing very fast:
http://blogs.sun.com/jonathan/
February 06, 2009:
“Billings for our Solaris-based Chip Multi Threading systems (also known as CMT or Niagara platforms) increased over 30% year over year in Q2. Based on Q1 and Q2 FY09 billings, CMT systems have now become a $1.4 billion dollar plus annual business for Sun, growing at significant double digits”
I think that all of us agree that the ordinary SPARC cpu is not fast (though x86 is plagued with bugs, and SPARC is not). The ordinary SPARC is not interesting. However, there is a new SPARC in town; Niagara SPARC. And it is a extremely fast CPU and a growing business.
You are apparently talking about the old SPARC cpu family. I am talking about the new unique Niagara SPARC cpu, which has several performance world records.
>>Also, SPARC has several performance world records, >>way faster than IBM Power servers.
>SPARC does not compete enough with Power. It’s main >competition is in areas where x86 has long since >moved in and displaced it.
I totally agree with you. Power is faster than SPARC. But Niagara SPARC is way faster than Power (on threaded work loads). Which I have proved, by posting benchmarks, where three Powerservers with 14 CPUs were needed to get half the performance of one SUN server with 4 Niagara CPUs.
If you think otherwise, please show us your proofs and I will reconsider.
>>Why do you state that “SPARC should be given the >>performance of a x86 CPU”?
>Sigh…….. Because that’s what has eaten SPARC’s >lunch for over ten years and why the company is in >the state that it’s in.
Agreed. But Niagara SPARC is another thing. It is the fastest CPU in the world and the business is growing rapidly.
>>One company migrated 251 Dell Linux dual CPUs to 24 >>Sun T5440 machines with 1.4GHz SPARC CPUs.
>Bully for them but I’m afraid that they’re very much >in a minority and the performance of SPARC is why >Sun’s workstation business has completely >disappeared. The majority just want to complete their >existing tasks at a faster rate.
I understand you think that migration was stupid if it were to ordinary SPARC CPUs. But it is not. It is to Niagara SPARC CPUs. :o)
But I was wrong. The company migrated 700 instances of MySQL on 251 Linux servers, down to 24 of T5220 Niagara SUN servers which has 50% of the performance of T5440:
http://blogs.sun.com/bmseer/entry/mysql_consolidation_on_sun_sparc
>>Ive asked you over and over again, if you are >>statings things as “facts”, please back the “facts” >>up.
>Probably because you don’t want to see the facts. Sun >is trying to sell itself. You might ask yourself why >and start there. Facts? Why do you think Sun is >trying to sell itself if its product line is so >compelling to people and as brilliant as you make >out? Those are the only facts you need I’m afraid.
I would love to see your proofs. Actually, I only support the best technology. It doesnt matter which company (although open tech is an advantage). I only care about the best tech. If you can show benchmarks about another tech showing that Niagara SPARC is inferior to another CPU, I will change my loyalty immediately. I mean it. The same with Solaris. etc.
So if you can prove that Niagara SPARC sucks in favour of another company, I will support the new company instead. I really mean it.
>>All this coming from someone who is so deluded he >>thinks that SPARC is a growing market. Deluded. >>Simply deluded. I’ve seen it in every Sun person I >>have seen for the past ten years.
I understand your confusion. Us Sun person that thinks that SPARC is growing, are not meaning the old SPARC cpu. We are talking about the new Niagara SPARC. And it is growing. Fast. We should be clearer with this, so people dont get confused. We all agree that ordinary SPARC is declining.
It’s totally insignificant regardless of how fast it’s growing. When you start from absolutely nothing then any growth looks fast, and I’m afraid it’s not replacing what Sun is losing.
Its performance is based on applications that are extremely parallel, which is how it gets some if its speed ‘records’, but few if any people are going to optimise to run on it and most probably can’t. It’s cheaper just to get a new, faster x86 system that can go through single threads faster. I think we’ve been through this before.
As I’ve said, if Niagara was the saviour then Sun wouldn’t be wanting to get itself sold. It clearly isn’t working.
>>It’s totally insignificant regardless of how fast >>it’s growing. When you start from absolutely nothing >>then any growth looks fast, and I’m afraid it’s not >>replacing what Sun is losing.
Agreed. But I hope that the growth will continue. You know, exponential growth beats everything given enough time. If Niagara SPARC continues to grow double digit it will certainly save SUN. The problem is, time is running out for SUN it seems. But if SUN have the endurance, then SUN will get the recognition it deserves. Most of the people seems to think that SUN has a very good technology.
>>Its performance is based on applications that are >>extremely parallel, which is how it gets some if its >>speed ‘records’, but few if any people are going to >>optimise to run on it and most probably can’t. It’s >>cheaper just to get a new, faster x86 system that >>can go through single threads faster. I think we’ve >>been through this before.
The SAP world record and many client-server systems (using a thread pool to serve many users) belong to Niagara SPARC. How often do you do single threaded number crunching on servers? A server needs to serve many users, that is, Niagara. x86 is good for single threaded work, that is: the desktop. It can not handle many requests without choking, it is not good as a server.
As someone said, x86 compares to a Porsche, you can transport 4 persons very fast in 10 minutes to a place. A Niagara SPARC compares to a extremely large bus that transports 100 persons in 30 minutes to a place. Now, who transports 1,000 persons fastest? Two very fast Porsche or one large bus? It seems that the company that migrated 251 Linux Dell servers down to 24 SUN Niagara, benchmarks showed that the Niagara solution was faster overall. I dont believe a company with a working solution would migrate to a slower SUN solution? I suspect the SUN solution is faster and cheaper.
>>As I’ve said, if Niagara was the saviour then Sun >>wouldn’t be wanting to get itself sold. It clearly >>isn’t working.
Agreed. I have never stated otherwise, have I? But I do hope that if time allows (doubtful), Niagara SPARC will grow to save SUN.
As a few people here have noted, this was a huge mistake on Sun’s part (whether Scott McNealy is at fault or not). I would be shocked if Sun get’s the same deal again. They blew off the deal and now want to deal again? This shows that Sun really wants IBM to purchase them. Thus, Sun is *not* in the driver’s seat this time around. If IBM doesn’t get a discount this time around, they just don’t want one.
IBM lucky?
It would make more sense for Dell to buy them out. HP and IBM already have competitive offerings. But if Dell bought Sun and used their marketing (which in all fairness has gotten better in the last 2 years), they could jump into a new revenu source. A lot of companies are Dell only shops and most of the people making the decisions on what computers to purchase (that being the uneducated big wigs that run the joint) know the Dell name and stick with it (their suport sucks less, still sucks, but less).
As much as I would hate to see Sun be bought by anyone (instead of just turning down IBM and pulling a Yahoo. Yahoo is kicking butt recently), it is likely to happen since they are shopping for a buyer. Having it known that you are trying to be aquired kills you if you later decide to “be strong and restructure” comsumer confidence goes down the drain.
c’est la vi…
A Dell acquisition makes no sense. Dell is a hardware vendor with a very limited software footprint. For the mountain of debt they would have to acquire to buy Sun, they would have to figure out what to do with Sun’s massive software portfolio and employees. Open source projects that depend on Sun engineers would also be in jeopardy.
IBM is a Weak Competitor against Microsoft. IT’s IBM’s Management that should be replaced. There’s got to be a better partner for Sun that this.
This is like Christopher Hassett turned down $500 million for Pointcast back in 1997; he got canned and the company sold two years later for $7 million. The dotcom ship has sailed.
Except that the dotcoms were not doing any profit or revenue. People invested in them because they thought they would make huge profit at one point in time.
Sun has a $14 billion yearly revenue and it is massively undervalued by the market. Buying Sun for half the yearly revenue is certainly a pretty damn good price. IBM is damn lucky and they know how to profit from a crysis like they’ve always done. IBM revenues are close to $100 billion a year. For them, $7billion is not much but for that money, they buy a monopoly on the server market.
No one should be surprised by what has happened and the reasons for it. Anyone who has ever interacted with Sun either on a formal or informal basis will know that the kind of culture that exists within Sun is nothing short of a giant reality distortion field.
People generally associate Apple with a reality distortion field – but at least Apple management knew when they were losing money that they needed some direction and focus. The problem with Sun management is that rather than taking responsibility they spent many years blaming Microsoft and other vendors for their tale of woes. Its even more telling that this deluded behaviour goes well beyond management all the way down to the trenches where the widget assembling takes place.
All of the problems at Sun were all self inflicted and they only have themselves to blame; Sun had their chance to do something 7 years ago – they failed to do it and now they’ll eventually be the product of a take over and find that the company will be stripped of the good parts and the rest will be thrown into the dustbin of history.
Edited 2009-04-09 07:43 UTC
I’m marked down a point – I guess there are Sun employee’s who would sooner silence the critics than accept that they and their managers have successful run the company into the ground. Keep the moderation points coming because the more you moderate me down the more you prove that I am right.
I totally agree with your post. I think there is a trend that the smarter the people are (ie very intelligent technically skilled people), the worse off they are as businessmen. Of course there are exceptions to the rule but that is a general trend and I think that is exactly what Sun has done.
My only thing is that I really do not want IBM to buy Sun or in other words Java because IBM software is just…how do I put it lightly…crap. Bear in mind I have only had experience with their Java based Websphere platform and what a nightmare that is to work with. It is slow, incredibly heavy, and expensive. Not to mention the IDE version 6 or something which I tried to install on a machine and it took well over 30 min to do so. And then when trying to install updates for it through Eclipse (which it is based on) it had to pull down another 1.5 gb of updates! Thats for an IDE!
Because of that Websphere reputation I think there are better candidates out there that would be better for the Java ecosystem if they bought Sun. I could be proven wrong, and I hope I am wrong but the way I see it right now, IBM buying Sun is bad for the Java ecosystem. I would rather Fujitsu buy out Sun because of their heavy involvement and investment in the Java community. My 2 cents.
You’re right – and what Sun needs is a strong CEO who is willing to take the company by the horns and lay down a path. None of this pussy footing around the edge consulting and having numerous meetings and retreats. Employee’s and shareholders want to see leadership and if that involves having to find a Steve Jobs like leader who rules like a dictator, then so be it.
Heck, for me, I’d love an opportunity in such a situation – but it is doubtful it would happen. I have a tendency of doing practical things like wanting there to be structure and coherency in product line ups. Spending time on the small details like making the operating system easy to manage so that potential customers don’t need to hire a UNIX expert just to simply get the thing up and running.
God forbid, I’d do something even more horrible – I’d realise that Sun is a business to make money and start working with Novell on mono so that potential customers can choose between Java or .NET instead of their technology framework dictating what they run as the operating system. I would work with third party software vendors and find out what the rock blocks are to porting the software to Solaris – and get those roadblocks removed.
But here am I taking a ‘hands on approach’ with management when the current Sun executives would rather jet set themselves around the world whilst their empire is collapsing before them.